Mecardo Analysis - Wool yield lifting

By: "Farm Tender" News
Ag Tech News
Jun 20, 2019
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This article is bought to you by Pepperton Poll Dorset & White Suffolk Stud at Elmore.

By Andrew Woods | Source: AWEX, ICS.

Greasy wool supplies tend to be discussed from the farmer side of the market in total volume terms, which ignores the various quality requirements placed for wool consignments. Sometimes it can be a case of “wool, wool everywhere but not a lot to fit” to poorly paraphrase The Rime of the Ancient Mariner. The most recent quality issue has been yield, which this article looks at.

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Wool consignments will have an average yield to meet and a minimum yield for lots within the consignment. These levels will vary according to the type of consignment, but as a rule, the yield levels required will be set according to expected supplies of greasy wool, which in turn is based on historical supply.

Figure 1 shows the monthly yield averages for wool sold in eastern and Western Australia since early 2007. Wool sold in 2007-2009 was a product of the dry season, beginning with the 2006 drought in eastern Australia. This shows up in the eastern yields which are consistent from 2007 to 2009, before the rise on the back of improved rainfall. In 2010-2013 Western Australia yields ranged at low levels.

Keep in mind the yields shown are average yields, which means there are plenty of lots with yields well below these levels. These are the lots which are discounted, effectively put into consignments which use low yielding wool. For fleece, this means being put into consignments which use a lot of pieces and bellies, and is priced accordingly.

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Yield has a strong seasonal pattern of supply, reaching a low usually in the June quarter and a high around Christmas. This seasonal pattern has been amplified this season by dry conditions in 2018, pushing eastern yields down to levels not seen since 2009 and western yields to levels not seen since 2014. The seasonal pattern tells us that yield will pick up from now through to Christmas, taking pressure off this wool characteristic.

Figure 2 shows the combined Australian monthly yield from early 2007, along with the rolling five year median yield. The median yield is projected out for 12 months, to act as a seasonal pattern guide. While yields later in 2019 are unlikely to reach the five year median levels, they will pick up with the 2007 to 2009 years a good guide as what is likely to happen.

2019-06-20 Wool 1

Key points

* Greasy wool yields look to have bottomed for this season.

* Yields show increase through to Christmas, although to lower levels than experienced during the past decade.

* Rising yields will take pressure off low yielding lots, although weakening overall demand is becoming a more important issue.

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What does this mean?

Low yielding lots have received increased discounts in recent months, as exporters struggle to place these wools. In the end, low yielding fleece looks to have been placed in consignments which normally use low yielding wool (pieces and bellies) and as a consequence are priced at lower levels. The supply chain has adjusted as well, with scours changing procedures (increasing costs) to accommodate some of the lower yield wool. Rising yield in the next six months (in line with seasonal patterns) will lower the effect that yields have had on wool prices.

www.mecardo.com.au